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Like other types of identity theft, investment fraud occurs in different ways. One way is when a stockbroker or financial advisor counsels an investor in a manner that goes against the Securities Exchange Commission (SEC) guidelines. Also called brokerage fraud, this is typically an “inside” act committed by an employee of a legitimate business. File a complaint with the SEC and the brokerage firm immediately if you suspect mishandling of your account.
A second type of investment fraud is when an identity thief gains access to and tampers with your investment accounts to transfer funds or redirect them to bogus investment schemes. Keeping a close eye on your account activity will help you to quickly discover and report discrepancies.
A third type of investment fraud is one that victims unsuspectingly initiate. The recent shift from employer-controlled pensions to self-directed plans has opened the floodgates for investment schemes that attract individuals who are ill-equipped to make wise investment decisions. One of the most common of these identity theft scams is the “IRA Approved” investment scheme. Promising incredible return percentages, these identity scams offer the “latest and greatest” investment opportunities – from technology-based investments, to exotic livestock, to real estate investment pools.
Formerly promoted heavily through telemarketing, these scams are now often promoted via infomercials and radio or direct mail advertising. Potential victims initiate the first call, hoping to catch a financial tidal wave for retirement. They are lured in with the assurance that the investment is “IRA Approved” or a “sanctioned” investment. There is no such thing. The IRS does not endorse, approve or sanction specific investments. Tens of thousands of people have handed over millions of dollars to this type of scheme. What should you do?
Hundreds of enforcement actions have been made and recorded against “IRA Approved” investment scams. Before making any investment, contact your state securities division for information about specific claims and warnings.